Real Estate Private Equity Deals

Draft a commitment contract to ensure all terms are clearly expressed in the private equity deal.

Decide what percentage of the initial investment capital you’ll need upfront from investors and, in exchange, offer them a capital and ownership percentage of the property. These percentages will be the basis of their commitment to your fund. When that property is sold, the contract should state what portion of those percentages will be returned.

Although these real estate deals will vary, they all have one thing in common. Like you, equity investors need to see an opportunity for a large return.

Private equity is usually allocated in different amounts throughout the years of the investment. If your properties are profitable sooner than expected, investors will be paid back earlier. This depletes the risk of failure and boosts their equity portfolio.

There are different types of real estate investors so be sure to choose the one that would give your business the most benefit. One of the most lucrative investment opportunities is to work with a joint venture real estate partner.

Joint Venture Real Estate Partners

The joint venture real estate partner that you choose should have a certain caliber of experience. These investors should maintain an impressive equity portfolio.

Also, keep in mind that their management style, references, and market sources will affect your partnership. If you choose a difficult, inexperienced partner, you are prone to have trouble throughout the commitment.

Set high expectations for their portfolio. You want to ensure you receive the best funding to generate the most profitable return, as these are long term business relationships.

Every commercial real estate company is different, which means your needs will be different. You may need $2M or $10M for capital funding. Regardless, you want to be sure the equity partner you choose can provide the amount stated in their commitment to your fund.

Benefits of A Joint Venture Real Estate Partnership

Benefits for Equity Real Estate Investors:

● Broadly diversify their equity portfolio, beyond stocks and bonds, without taking direct risks.
● Receive a much larger return than with a publicly traded company.
● Have an exclusive entrance into an investment that others may be unable to access.
● Gain investing experience through partnering with real estate experts.

Benefits for Commercial Real Estate Companies:

● Easily raise initial capital needed for your fund.
● Reach success with your properties faster than average companies.
● The control to request how much of the investment you need as you analyze your property’s needs.
● Leverage to access other markets.

All contracts have risks, but aim to outline any concerns in the commitment. The most important thing to remember is to ensure the benefits of your partnership can outweigh the risks.

Risks of A Joint Venture Real Estate Partnership

Like all investments, you run a risk of losing profit. This loss can be endured on both sides of the partnership.

Risks for Equity Real Estate Investors:

● Lack of liquidity for the time period of the investment.
● Failure of the real estate property.
● Change of management in the company.